3/16/2010 @ 6:00PM

Do Men And Women Think About Money Differently?

For Galia Gichon it’s an all too familiar refrain. “I get a lot of women who make $100,000 or more but have no savings because they are spending everything they’re earning,” she says. “They also often have very little retirement savings, with Individual Retirement Accounts under $10,000.”

Gichon, who founded Down-to-Earth Finance, a New York-based advisory firm, in 2001, also works with wealthy women who feel uncomfortable grilling their regular advisors about portfolio performance. Much of the problem boils down to fear and a lack of confidence–something many advisors find all too common among women but far less among men.

Currently, women constitute half of the U.S. workforce and control more than 50% of the wealth in the U.S., according to statistics cited by the National Council for Research on Women. So why are women across the wealth spectrum prone to doubting themselves in money matters?

“Historically, women haven’t had confidence in their own decision-making–which is unfounded, as women’s ability to make good decisions based on both fact and intuition is actually quite good,” says Margaret Towle, managing director and head of alternative investment research at Greycourt & Co., in Portland, Ore.

Towle says that there may be a variety of factors that cause women to doubt themselves–how they were raised, the kind of education they received, etc. But regardless of the underlying factors, low confidence and fear can translate into avoidance that results in not taking charge of one’s financial future.

“I had one client in her 30s with her own interior design [firm]–a six-figure salary, recently married, no children–who assumed she’d need $5 million to retire,” Gichon says. “This felt like an unmanageable number, so she did nothing.” After calculating what the woman would actually require for retirement and determining a monthly plan, Gichon got her started toward a goal. “When clients learn about investments and make plans, their fear dissipates,” she says.

Eleanor Blayney, a veteran financial advisor who recently founded a Washington, D.C.-based network of women advisers and women clients, says that the name of her firm, Directions LLC, reflects the differences between men and women. “Basically, women ask for directions. Once they’ve taken the big step of seeking advice, they tend to listen and take action,” she explains.

Oftentimes women, unlike their male counterparts, are comfortable with the long view. They focus on how spending, saving and investing can support their life goals.

“For women, money is about a lifestyle, while for men it can be more about winning and losing. That’s a key difference I see playing out every day,” says Susan Hirshman, a banker with J.P. Morgan Private Wealth Management in New York, who this fall will publish Does This Make My Assets Look Fat? (The book plays on a diet theme for encouraging long-term financial goals. For example, the concept of portfolio volatility is likened to a woman’s morning weigh-in.)

Financial advisors are unclear whether men are better budgeters than women.

Although some suggest that men are more disciplined, advisors agree that women tend to get a better handle on their spending habits once they identify their goals.

“When they look at their portfolios, more often than not, women want to know ‘Are we on track?’” says Mark Curtis, a financial advisor with
Morgan Stanley
Smith Barney based in Palo Alto, Calif. “Being the matriarch of a family, their concerns often include gifting and management of the assets. They’re more end-result oriented, whereas, for example, men tend to be more concerned about issues such as rates of return and volatility.”

Women, however, also frequently feel less confident about metrics and math.

Towle recalls advising a sophisticated group of wealthy women philanthropists about private-equity investing. “I was amazed at some of the perceptions and attitudes. These were savvy women, but many of them had a math phobia that wasn’t necessarily based in reality.”

Patricia Bell, a financial advisor with Merrill Lynch in Short Hills, N.J.–and one of the country’s top-ranked women in her profession–says once women feel more educated, they become more exacting.

“Women want to know what to expect, how many meetings there will be, how you’re going to monitor investment returns and how over time you’ll be able to help them obtain their goals,” she says. “I find that men tend to take a more casual approach and shoot from the hip. That’s the bottom line.”

In other words, women become more measured once they have the tools in hand. And if anyone still doubts a woman’s ability to master metrics and embrace risk, think about this: In August last year Chicago-based Hedge Fund Research published a report showing that from January 2000 through May 31, 2009, women hedge-fund managers outperformed their male counterparts, delivering average annualized returns of 9%, vs. 5.82% for the HFRI Fund Weighted Composite Index.

While critics of the study argue that women constitute a tiny fraction of the fund-management world, no one can deny that it provides tantalizing evidence of women developing a taste for risk–and for winning. As for the confidence gap, women should just step across.